Deal brakes nation at cliff, but higher taxes still loom

By Matt Tessnear

Published: Wednesday, January 2, 2013 at 05:58 PM.

McHenry

“Tax hikes and increased spending do nothing to address the serious debt problem our nation faces. The bottom line is that small business owners across western North Carolina will pay more in taxes and less to employees. That’s why I opposed this deal and will fight for real spending cuts in the 113th Congress.”

-- U.S. Rep. Patrick McHenry, Republican representing North Carolina

Hagan

“While I believe it is unacceptable that Washington once again waited until the 11th hour to find a solution, and though I would have preferred a comprehensive, balanced solution to avert the fiscal cliff and begin reducing the deficit, I voted for the plan put forth so that we can stop a tax hike on middle class families in North Carolina. The average family in our state would have seen their taxes increase by $2,200 without this action. We still have issues surrounding the fiscal cliff that we must resolve, including the defense cuts that will have an outsized impact in North Carolina and our skyrocketing federal debt. The challenges we face may be complex, but working together should not be this hard, and I will continue urging my colleagues on both sides of the aisle and both sides of the Capitol to come together to work on a commonsense solution.”

Headlines across America hailed a new deal that “averted” a national economic crisis.

After months of federal leaders haggling on a plan to prevent large-scale tax increases and massive spending cuts for numerous programs, Congress agreed on a deal late Tuesday to avoid the “fiscal cliff.”

Most Americans are saved from immediate large income tax increases.

A variety of programs won’t immediately see major cuts in funding from the federal government.

Financial markets around the world celebrated the deal, with the Dow Jones Industrial Average closing up 308 points Wednesday.

But federal lawmakers acknowledge the deal doesn’t solve all the nation’s economic troubles.

“We still have issues surrounding the fiscal cliff that we must resolve, including the defense cuts that will have an outsized impact in North Carolina and our skyrocketing federal debt,” said Sen. Kay Hagan, a Democrat who represents North Carolina, in a news release Wednesday. “The challenges we face may be complex, but working together should not be this hard.”

Following the deal, three-quarters of Americans are expected to still experience a 2 percent increase in the Social Security payroll tax, which will go from 4.2 percent to 6.2 percent.

And the deal is not expected to reverse the trend of a rising national debt.

“Now, the focus turns to spending,” House Speaker John Boehner said, as Congress turns its focus to spending cuts on national defense and other programs, set to take effect in the coming months.

The Associated Press contributed to this report. Reach Matthew Tessnear at 704-669-3331, at mtessnear@shelbystar.com or on Twitter@MatthewTessnear.

Will the ‘fiscal cliff’ deal save Americans from tax increases?

In a word, no.

The Social Security payroll tax to rise for three-quarters of Americans

99 percent – The number of Americans the new tax package will protect from federal income tax increases.

77 percent – The number of Americans that will still pay more federal taxes starting this year because the deal did nothing to prevent a temporary reduction in the Social Security payroll tax from expiring. In 2012, that 2-percentage-point cut in the payroll tax was worth about $1,000 to a worker making $50,000 a year.

$579 – The average tax increase households making between $40,000 and $50,000 will face, according to the nonpartisan Tax Policy Center’s analysis.

$822 – The average tax increase households making between $50,000 and $75,000 will face.

The package approved this week extends most Bush-era tax cuts for individuals making less than $400,000 and married couples making less than $450,000.

More significant tax increases for high-income families

$14,812 – The average tax increase for households making $500,000 to $1 million, according to the Tax Policy Center.

$170,341 – The average tax increase for households making more than $1 million

The new tax package increases the income tax rate from 35 percent to 39.6 percent on income above $400,000 for individuals and $450,000 for married couples.

High-income families will also pay higher taxes this year as part of Obama’s 2010 health care law. As part of that law, a new 3.8 percent tax is being imposed on investment income for individuals making more than $200,000 a year and couples making more than $250,000 a year.

Source: Associated Press

What else does the deal affect?

Unemployment benefits – The measure prevents an expiration of extended benefits for an estimated 2 million jobless, which includes nearly 1,000 Cleveland County residents, according to the N.C. Employment Security Commission.

Doctors, hospitals – The deal blocks a 27 percent cut in fees for doctors who treat Medicare patients. It requires that, in the next decade, hospitals pick up nearly half of the approximately $30 billion cost of stopping that cut.

Lawmakers – The deal stops a $900 pay increase for lawmakers from taking effect in March.

Across-the-board spending cuts – The measure stops $24 billion in cuts set to take effect over the next two months, although only about half of that total would be offset with savings elsewhere in the budget.

Source: Associated Press

How is the national debt affected by the deal?

$4 trillion – The amount the measure is expected to add to federal deficits in the next decade, according to the non-partisan Congressional Budget Office.

One example of the increase in debt is the extension of unemployment benefits, which will cost $30 billion over that time and increase the debt, if not offset by savings elsewhere in the nation’s budget.

Source: Associated Press

How did they vote?

How did Cleveland County’s elected representatives in Washington vote on the fiscal cliff deal in front of Congress?

U.S. Sen. Kay Hagan, Democrat Yes

U.S. Sen. Richard Burr, Republican Yes

U.S. Rep. Patrick McHenry, Republican No

How did other notable leaders vote?

U.S. House Speaker John Boehner, of Ohio Yes

Senate Majority leader Eric Cantor, of Virginia No

U.S. Rep. Paul Ryan, of Wisconsin, ’12 VP candidate Yes

* The House approved the package 257-167, after the Senate approved the measure 89-8.

Source: Associated Press

What they're saying

Leaders who represent Cleveland County and North Carolina in the federal government weigh in on the fallout of the fiscal cliff deal:

McHenry

“Tax hikes and increased spending do nothing to address the serious debt problem our nation faces. The bottom line is that small business owners across western North Carolina will pay more in taxes and less to employees. That’s why I opposed this deal and will fight for real spending cuts in the 113th Congress.”

-- U.S. Rep. Patrick McHenry, Republican representing North Carolina

Hagan

“While I believe it is unacceptable that Washington once again waited until the 11th hour to find a solution, and though I would have preferred a comprehensive, balanced solution to avert the fiscal cliff and begin reducing the deficit, I voted for the plan put forth so that we can stop a tax hike on middle class families in North Carolina. The average family in our state would have seen their taxes increase by $2,200 without this action. We still have issues surrounding the fiscal cliff that we must resolve, including the defense cuts that will have an outsized impact in North Carolina and our skyrocketing federal debt. The challenges we face may be complex, but working together should not be this hard, and I will continue urging my colleagues on both sides of the aisle and both sides of the Capitol to come together to work on a commonsense solution.”

-- U.S. Sen. Kay Hagan, Democrat representing North Carolina

Fiscal cliff timeline

Some of the past year’s major events on the road to the fiscal cliff deal:

* Dec. 14-17, 2012 -- Obama and U.S. House Speaker John Boehner trade key concessions and appear headed for a compromise agreement.

* Dec. 18, 2012 -- Boehner walks away from talks with Obama, saying the president's plan was not "balanced." The speaker says House Republicans plan to pass a "Plan B" bill of their own.

* Dec. 21, 2012 -- Unable to gather enough votes from his own party for "Plan B," Boehner abruptly adjourns Republican-controlled House for holidays. He says Obama and Democratic-controlled Senate must come up with compromise proposal.

* Dec. 27, 2012 -- Senate returns from holiday break with only four days remaining until the "cliff" arrives. Congress continues work on deal.